Yahoo Finance Is There Now An Opportunity In Canadian Tire Corporation, Limited (TSE:CTC.A)?
While Canadian Tire Corporation, Limited (TSE:CTC.A) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the TSX, rising to highs of CA$169 and falling to the lows of CA$145. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Canadian Tire Corporation's current trading price of CA$150 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Canadian Tire Corporation’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Canadian Tire Corporation
Is Canadian Tire Corporation Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Canadian Tire Corporation’s ratio of 8.62x is trading slightly below its industry peers’ ratio of 13.05x, which means if you buy Canadian Tire Corporation today, you’d be paying a decent price for it. And if you believe that Canadian Tire Corporation should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Canadian Tire Corporation’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Canadian Tire Corporation look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Canadian Tire Corporation's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? CTC.A’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at CTC.A? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on CTC.A, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for CTC.A, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For instance, we've identified 2 warning signs for Canadian Tire Corporation (1 doesn't sit too well with us) you should be familiar with.
If you are no longer interested in Canadian Tire Corporation, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
